The Tri-Agencies1 recently issued FAQs that provide additional guidance regarding the extent to which medical premium discounts may be offered to participants for receiving COVID-19 vaccinations. Calfee's Employee Benefits and Executive Compensation group attorneys have provided below a high-level summary of this guidance.
Typically group health plans are prohibited from discriminating against participants and beneficiaries in eligibility, premiums, or
contributions based on a health factor. However, an exception exists in the context of wellness programs, which allows premium discounts, rebates, or modification of applicable cost-sharing requirements in return for adherence to certain health promotion and disease prevention programs so long as they comply with the applicable regulations.
The FAQs provide that a group health plan may offer participants in the plan premium discounts for receiving the COVID-19 vaccination if the premium discount complies with the applicable wellness program regulations. The FAQs
classified a COVID-19 vaccination as an activity-only health-contingent wellness program. Thus, the health-contingent incentive is only permissible under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) if it satisfies the five criteria of HIPAA wellness program regulations:
- The program must give eligible individuals the opportunity to qualify for the reward under the program at least once per year;
- The reward, together with the reward for other health-contingent wellness programs with respect to the plan, must not exceed the applicable percentage (30%) of the total cost of employee-only coverage under the plan;
- The program must be reasonably designed to promote health or prevent disease;
- The full reward under the activity-only wellness program must be available to all similarly situated individuals; and
- The plan or issuer must disclose in all plan materials describing the terms of an activity-only wellness program the availability of a reasonable alternative standard to qualify for the reward, including contact
information for obtaining a reasonable alternative standard and a statement that recommendations of an individual's personal physician will be accommodated.
Reasonable Alternative and COVID-19 Vaccine
Most employers understandably have questions about the “reasonable alternative” standard as it relates to the COVID-19 vaccine incentive. A reasonable alternative must be provided to obtain the discount to individuals for whom it is unreasonably difficult (due to a medical condition) or medically inadvisable to receive the COVID-19 vaccine. In the FAQs, the agencies state that a reasonable alternative may be requiring an attestation that the individual will follow the CDC’s masking guidelines for unvaccinated individuals. An employer is
permitted to require a doctor’s note related to whether the vaccine is medically inadvisable. Prior guidance issued by the EEOC also indicated that the Americans With Disabilities Act of 1990 (ADA) would also require a reasonable alternative when an employee cannot get the vaccine due to a religious belief.
It was noteworthy that the FAQs classified the COVID-19 vaccine as a health-contingent activity-only wellness program, instead of only a participatory program, the latter of which would not be subject to the 30% incentive limit. Under HIPAA’s current wellness rules, a
participatory program includes diagnostic testing so long as the reward is not contingent on the results. Before the guidance was issued, some practitioners were taking the approach of classifying the COVID-19 vaccine as a participatory program as it was akin to a diagnostic test and there would be no results. The result of the Tri-Agencies classification (however well justified it may be as a matter of law) is that it prevents employers from providing a more robust reward to employees for receiving the COVID-19 vaccine than the 30% limit permits. Many employers also have already met the 30% incentive limit within their wellness program designs and would need to eliminate or reduce other aspects to accommodate a COVID-19 vaccine incentive.
Restricting Treatment for COVID
The FAQ also states that a group health plan may not condition eligibility for benefits or coverage on COVID-19 vaccination status, including benefits for the treatment of COVID-19. This would be considered discrimination based on a health factor, and the exception for wellness programs would not apply.
Determining Affordability of Coverage With Respect to Employer Shared Responsibility Payment Under Section 4980H(b)
A premium incentive that relates to the receipt of the COVID-19 vaccination, similar to other non-tobacco premium incentives, is disregarded for purposes of determining whether employer-sponsored health coverage is affordable under the Affordable Care Act (ACA). Consequently, affordability is based on the full premium cost the participant would have paid if he did not receive the incentive.
Employers considering (or currently offering) discounts for medical plan premiums to
participants who received the COVID-19 vaccine should review this guidance carefully. Employers should calculate the incentive limit to ensure that the vaccine incentive, taken together with all other non-tobacco incentives, does not exceed the 30% incentive limit, particularly if the employer had previously considered the COVID-19 vaccine as a participatory wellness program. In addition, employers should ensure that the ACA affordability standards are still being met assuming that participants do not earn the COVID-19 vaccine incentive. Employers also need to consider the reasonable alternatives that will be offered to employees with medical conditions, disabilities, or religious beliefs who do not receive the COVID-19 vaccination.
There are still questions outstanding as to how these premium discounts will overlap with the anticipated Occupational Safety and Health Administration (OSHA) rules applying vaccine mandates to employers with 100 or more employees. It is worth noting that the EEOC has separate regulations governing the applicability of the ADA to wellness programs. However, in its current form, the regulations defer to HIPAA when it comes to health-contingent wellness programs. We currently have no reason to believe that would not apply in the case of COVID-19 vaccine incentives.
Calfee will continue to monitor and be a
resource for any additional guidance.
1U.S. Department of Labor, the Department of Health and Human Services, and the Department of the Treasury